The leading fiscal watchdog of the European Union (EU) has raised issues regarding the adequacy of audit measures and regulation on the billions of euros distributed to EU nations as an aid to recover from the Covid-19 crisis.
Tony Murphy, currently leading the European Court of Auditors (ECA) and originating from Ireland, argued that it’s pointless for the EU to bestow considerable sums of money on member states, if the funds are not being allocated correctly.
The purported percentage of EU funding that did not abide by regulations, identified by the ECA based in Luxembourg, has reportedly doubled over the last four years, as stated in the independent body’s yearly review. In last year’s EU budget expenditure, auditors determined an error rate of 5.6 per cent, with the majority of issues originating from cohesion funding intended to assist the less wealthy areas within the bloc.
Significant doubts were also mentioned by Mr. Murphy surrounding the EU’s flagship recovery programme post-Covid-19 valued at €750 billion, which according to him, lacked transparency for tracking the effective usage of funds. Ireland was amongst only four such nations that didn’t utilize any funds from the recovery package till the end of last year and only received its first payment in July this year.
The European Commission assured that claims for money would be simpler than the prevalent EU funding programmes, however, Mr. Murphy reported many countries voiced complaints of increased red tape. Owing to the deadlines to appeal for the substantial grants and loans, multiple countries experienced the pressure of utilizing the funding or risk losing it, which, as per Murphy, did not always result in national authorities choosing the optimal projects for funding.
“There’s no point in allocating funds to member states if they can’t manage it properly,” stated Mr. Murphy. The auditor’s report identified “sustained flaws” in the levels of control on EU funding expenditures in certain countries.
In the coming years, due to the borrowed money to finance the post-pandemic plan, the EU would face pressure to make repayments, Mr. Murphy stated. He also suggested that other union priorities may be impacted as the approximately €250 billion budget of the EU is already under strain and the national capitals are reluctant to increase their annual contributions.
Last year, Ireland continued to be a net contributor to the EU budget, contributing approximately €1 billion more than the funds it received.
According to him, the European Union is at a critical juncture where it will need to source additional funds if it wishes to continue its ambitious projects, notably in defence and expansion. “Currently, the EU’s funding is static, while the areas where it wants to intervene and extend support are increasing,” he noted.
“Concerning” was Mr Murphy’s designation for the high percentage of cases where regional development funds, meant for less affluent EU areas, were not used in accordance with standard procedures. However, he clarified that this check simply highlighted situations where the fund utilisation did not adhere to established guidelines or prerequisites. “There are instances where notwithstanding issues of non-compliance with certain conditions, the outcomes were likely beneficial for EU residents,” he stated.
Conversely, there have been instances where all conditions have been fulfilled, however, he remarked that the project turned out to be a ‘white elephant’.
Mr Murphy also mentioned that the United Kingdom contributed an additional €8.5 billion last year to address the so-called Brexit “divorce bill” liabilities it owed to the EU. The payment of these liabilities became a significant sticking point during the UK’s withdrawal talks from the EU. “Despite the earlier resistance, they are paying the bill,” he observed, adding that “by the end of 2024, it is expected to reduce to around €4.6 billion”.